MAS Financial Services Limited (MASFIN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the MAS Financial Services Limited Q4 FY '21 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ramesh [indiscernible] from ICICI Securities. Thank you, and over to you, sir.

Yes. Thanks, Marekh. Good afternoon, everyone, and welcome to the MAS Financial Q4 FY '21 Earnings Conference Call. From the management team, we have with us today Mr. Kamlesh Gandhi, Chairman and Managing Director; Mr. Darshana Pandya, Director and CEO; Mr. Ankit Jain, CFO; and also we have our senior management team of the MAS Financial. I will start with the opening remarks and then open the floor for Q&A. I thank the management for giving us the opportunity to host the call. I will now hand over the call to Mr. Kamlesh for opening remarks. Over to you, sir.

Thank you, Ramesh, and good evening to all of you. And first of all, I wish all of you a very safe health, and I wish all of you are in good health, too. So as you all know that we have been passing through a very turbulent and challenging time, but as always and in consistent of our policy, we'll be focusing more on the possibilities than the problems. So we would like to magnify that. So what are we doing at MAS? Since infection and more precisely from last year, is to strengthen the balance sheet size without being much bothered about the comparative figures on growth and profitability, while we have done well on that front also. So just to take you through the fundamentals of the company, with a 27% of capital adequacy and a buffer -- liquidity buffer of more than INR 1,000 crores and a provision, which we have not dipped into. We have kept the provision constant at INR 56 crores. And after that, having a net effect, next year's Page 3, as at around 1.53% -- and ending with a yearly profitability of INR 143 crores is what we have done over this year. In terms of the quarterly performance, the profit stands at around INR 36 crores -- INR 34.5 crores -- sorry, INR 36 crores for the quarter, which is a slight jump over the last 12 corresponding quarter of around -- which was around INR 34.5 crores. And in terms of disbursement this last quarter, that is a quarter from January to March, we all were very happy to see that the economy is coming back to normal. And that was reflected in our working also where we could register a disbursement of close to INR 1,300 crores as compared to INR 1,000 crores in the previous quarter, that is the quarter ending December. In terms of various assets under management and in terms of the various products what we have been doing into, it has been around INR 3,000 crores -- close to INR 3,000 crores in micro enterprise loans. SME loan attributed INR 1,872 crores, 2-wheeler contributed INR 326 crores and commercial vehicle contributed around INR 202 crores. And overall, there was a dip of around close to [ 9.95% ] in the [ total year ]. But as I shared with you in the beginning, that was not the area of focus. The area of focus was to strengthen the balance sheet because being a practitioner for more than 25 years, we firmly believe that this shall also pass. And when the economy returns to normal, the companies with the strong fundamentals will again have an opportunity to grow our balance sheet side. And so we are also confident that once things comes back to normal, we will come back to a trajectory of around 20%, 25% growth. And we have a very strong [indiscernible], whereby the capital adequacy is more than sufficient. We have grown mainly through internal accruals. Because of a very strong track record of the debt management, we are very confident to reach that debt at competitive rates. And last but not at least the vast market size, which we serve, which is the MSME and our lease expertise. So this is how we have navigated through this crisis. And over the last 25 years, we have focused mainly on creating quality assets as I personally believe that every one of us are mandated to create quality rather than just the quantity. In terms of -- just to appraise you on our housing finance numbers. The housing finance stood stable like around INR 284 crores. And we could register the high profitability in housing finance due to lesser [indiscernible] in this year. Anyhow we carry a provision of 1.25% of our loan book asset even in housing finance with net NPA around 0.26%, which is not again stable as compared to the last year. We have been, as a stable AUM since -- many quarters in houses. And we internally believe that we have valid reasons to be there because of the latest development in the market, and then since last 12 to 15 months due to COVID. But nevertheless, let me assure you that this is going to contribute very meaningfully over the next 3 to 5 years because the way we have established ourselves in terms of systems operations, in terms of managing the quality of the assets, and here also the capital adequacy is very strong with a very strong commitment of capital as and when required by the parent company and the promoters. So while it has been a stable AUM this quarter, it is -- we are very confident that this will contribute very meaningfully in the coming 3 to 5 years. So this is then why we had a very detailed presentation and also a very detailed press note. I'll not take much time on the commentary to give you more opportunities for your queries. I'll request Ankit if he wants to share something on the liability side. And before that, I think I've missed out on -- about 1 or 2 points, which I'd like to share with you, which you all must be interested is on the collection efficiencies. As shared in the presentation, we had around 95% collection efficiency in the last quarter. April, it has dipped slightly to 92%. And we have yet to see what exactly the figures will be in May given a massive disruption in the economy. So we'll be in a position to know how it spans out within a week or so, but looks like it may dip further as -- and then very for the obvious reasons. On the restructuring part, we -- as I had communicated in last time also that it will be less than 1%, is around 0.3% as on 31st March. We have been very cautious in restructuring only to those who can repay. And for them, the credit is not distorted so as to enable them to raise money from -- that from the other financial institutions. So then we have [indiscernible] restructuring. So it has been around close to 0.3% on restructuring as of 31st March. Now I'll hand it over to Ankit for his brief on liability.

Yes. Thank you, sir. To further update on the liability management, the company during the quarter, pre-servicing liability management was able to maintain equity buffer of around INR 1,000 crores and unutilized cash flow securities of around INR 325 crores. In addition to that, the company has sanctioned on hand to the tune of INR 1,000 crores in the form of term loan and direct assignment. In the last quarter, company did around INR 190 crores direct assignment transaction. The company further has more than INR 800 crores sanction on hand, which will be utilized during the current year. The company has available capital facility of INR 1,795 crores, out of which company maintained to the tune of -- level of 65% to 70%. And this portion is kept as a liquidity buffer. During the quarter, we successfully rolled over around INR 1,100 crores after working capital loans, which are sublimit to the cash flow limit. Company raised around INR 655 crores term loan during the quarter. This helped us to further strengthen the asset liability maturity pattern. The company further has around INR 150 crores sanction on hand, which we will utilize during the quarter -- during the current quarter. Just to add on the company raised INR 200 crores refinance from NABARD during the quarter. This was our first relationship with NABARD, and we both take it to a new height with this going forward. Company also raised the first MLD, which is market-linked debentures of INR 55 crores during the quarter. This was a INR 50 crores plus [ grade 2 ] option of INR 15 crores. On the ALM, company has also asset structure, it is structure liquidity for the period ended 31 March 2021. And based on the assessment, there is no negative impact on the liquidity, and the cash flow in all the cumulative buckets remain positive. The company's capital adequacy remained strong at 26.85% with Tier 1 of 24.81%, resulting into a debt equity of 3.12x. Just to highlight the cost of borrowing for the quarter. Works out to be 8.7%, which was for the December quarter, 9.10%. And for the whole year, it was 9.10% compared to last year, which was 9.32%. So by the effort, efficient liability management and because of a reduction in [indiscernible] by the bank, we are able to our cost of borrowing, and we further seem to reduce it further in the coming -- during the current year. Thanks all for -- and I hand over the call to Kamlesh.

So thank you, Ankit. And that's all from our side, and now we are open for the Q&A session.

[Operator Instructions] The first question is from the line of Malhar Hemal Manek from Manek Investment.

Hope all is well and hope you are not impacted by the cyclone. Sir, my first question is about Sambandh Finserve. I am aware that we have provided for our total exposure of INR 18.4 crores in the second quarter itself. But I want to understand why exactly this happened because in the letter written by the CFO, they mentioned that they also saw the books all the way since FY '16. And another Ernst & Young report mentioned that the fraud has been going on for 8 years. So I want to understand why were we unable to spot it. Like is there any flaw or inadequacy in our due diligence process? And what changes have we made to our due diligence systems to make it more stringent? And what is the likelihood of such an event occurring again in the [ future ]?

Thank you, we are good. The cyclone has not affected as it was anticipated. And Malhar, this was discussed at length and it has been shared in our investor presentation many times. So I would not like to repeat it again. But once again, this is a one of the incidence in our INR 14,000 crores of cumulative disbursement, which is -- and overall, our NBFC portfolio is managed in such a manner that our net loss is less than 0.5%. And this has been explained in our presentation, and in the last con call also, sufficiently enough to what -- how we will spend it. And I will request for you, once again, to go through our presentation as there is around 4 to 5 slides dedicated on how exactly we are strengthening. And strengthening the systems and operation is a part of the credit process. And we should understand that we are not in the business of avoiding this, but managing this. Such type of incident can happen, may happen, but it is only about how you take it, what is the capacity of the company to absorb it, and what is the capacity of the company to learn and unlearn from time to time.

Okay. Got it. And sir, my second question is that Dakshaben is an independent Director of our Board as well as Managing Director of another NBFC, Altura Financial Services. And in October of 2019, Altura has sold its microfinance portfolio to Centrum MicroCredit. So it seems like Dakshaben may be an interested party in Centrum MicroCredit. And if I'm not wrong, as of June 2020, we had given a term loan of INR 94.96 crores to Centrum MicroCredit. So can you please clarify the reason for this?

I'll ask my company secretary to ask -- to give you the reply on the conflict of interest of Dakshaben, it is not so. So there is a timing whereby she has already resigned as MD from Altura. And then she was appointed as the Board member. But my company secretary will answer at length on this conflict of interest and whatever you are telling us.

Okay. And sir, just one quick question. In our NPD by private placement at 9% interest on 16th June 2020, I know that we had PSU banks like Central Bank and Indian banks that are invested, but which were the private sector banks that invest?

So Malhar, this is -- this not the entity which are issued under the [ PCG ] other than by the government, and that was only allowed for PSU banks.

Okay. So there were no private sector banks in that?

It was not allowed by the government.

Okay. Got it. And sir, lastly, I have some suggestions for improving the due diligence process. So can I please...

No, this is not the right forum for suggestion. Suggestion can be mailed and I receive your mails from time to time. So let it be limited to the financials and that very better because suggestions is an endless process. I am happy to see you so inquisitive at your age, but -- and I receive your mail very regularly. So let us keep suggestions not on this forum.

The next question is from the line of Sarvesh Gupta from Maximal Capital.

Sir, just one small query. So this March quarter was supposed to be -- I mean, many financial firms have been able to land up at a gross NPA number, which was similar to without dispensation figures of Q3 because March was a very strong quarter of business. But for us, there was some spike. So this, plus the trends that you're seeing in the last 1.5 months, if you would want to give some color on our overall gross NPA numbers as well as -- I think this time, even for our assigned book, we have disclosed some numbers of gross NPAs, et cetera. So if you can throw some light on that as well. That is number one. Secondly, is a bookkeeping question. I think the difference in the net worth for the full year between FY '20 and '21 was much larger than the pack net of dividends. So if you can just explain the difference.

Coming on the quality of the portfolio, we have always maintained that it will be manageable. So if you recollect, we always told that our GNPA will remain between 1.5% to 2%, and we have ended up at around 1.93%, especially taking into account the class of the customers will be sold to. And secondly, after closing a lot, it is at around 1.53%. So while efforts are continuously on for better credit new divisions and collection, but this is in light of our expectation for the year. And going forward, looking at the current scenario, it will be difficult for me to predict as of now. So once the things open after, say, 8 to 10 days in phases at various places, we will be in a position to assess what exactly the situation is. We all know that this wave is different from the last wave. This wave has had more of the human resources also rather than just the businesses. So the capabilities to connect to them is also reduced since the month and that we are trying to reconnect to various stakeholders, especially the borrowers whom we are serving to. But within the next 15 days to 1 month, the things will unfold. But I personally believe looking at our due diligence and the past experience, that the provisions what we have and the way we do the credit due diligence, once again, GMP will be range 1 -- around 2%, maybe point -- a spike in 0.25% to 0.5% temporarily, but can come back to normal, and [indiscernible] will remain within the -- on the expected lines because the NPA necessary does not mean loss given default. It -- in our case, where we sell to the informal economy, the chances of collections are very high. On the -- Ankit can answer that the difference in the -- network is due to OCI, right?

Yes. So what happened is because of the in-depth impact, the OCI is -- the provision which we do is adding the OCI. And therefore, the numbers of -- will not match from the pad directly.

The next question is from the line of Bhavesh Kanani from ASK Investments.

My question is really on the provisions and how they connect with the asset quality existing as well as anticipated trends in the 6 months going forward. So as you mentioned, our restructured pipeline is not that heavy. But given the second wave, and as you mentioned, the second wave appears to be a little different in terms of impact, how high can this restructured pool can go to? And overall behavior of collection, as you mentioned, in April, there is a benefit. So putting all these things together, your view for next 6 months, the dip in provisions during this quarter was a little surprising. Are we in conclusion, saying that the buffer provision we have for COVID as of now is sufficient to tide over the challenges that we may experience in next 6 months? Or we can resume higher provisioning rates in the coming quarters?

So starting from the COVID provisioning, as I shared in the opening remarks, we have not dipped into it at all. So we have kept it constant, so presuming that the COVID provision -- the COVID condition is prevailing. Now as we know that every time a new rule comes, we see a different dynamics and dimension of the impact. Now the dimension and the dynamics of this impact will take around a month. As I shared earlier, it will take around a month or so for us to really assess. But as of now, as I talk to you, I have 1.39% on-book assets of provisioning on stage 3 as it covers our stage 3 on-book assets completely. And it covers around more than 60% to 65% of our stage 2, stage 3 assets. So we have reasons to believe that the current provisions are sufficient. But if the situations are still unpredictable and dynamic, what we can do is that if we can keep this provision stable and then create a new one also or write-off progressively keeping this provision stable. Coming to the provisions for -- the provision figure which has reduced, now what has happened is that we are covered under ECL, that is expected credit loss, which is based on the past performance. Now basis the past performance and basis the right now what the company has taken, this was the number of what we have arrived to in terms of credit impairment for the quarter. And what -- and even though we had worked -- we are endeavored with the auditors to have the maximum management overlay. Otherwise, what has happened that what we have predicted at the time of COVID for COVID provisioning, as such, we have performed far more better than that. But we used our management overlay to keep the COVID provisioning constant and then had to apply ECL to arrive at the provisioning figures.

Okay. Okay. And sir, you just touched upon the housing finance business a bit, and you sounded quite positive on the 3-year prior horizon. Can you add more color to that business in terms of what your plans are, how the experience has been during this COVID? The basic numbers you've shared are quite interesting and impressive. But if you can add more color on your view for the next 3, 5 years.

Yes. Yes, see, we basically sold to the rural in the affordable space. And I've shared this right from 2017 onwards, and then we know that we have been facing a lot of challenges where we decided to focus on the fundamentals rather than growth. The basic model is to touch first the rural villages in Gujarat. Gujarat has 17,700 villages. And out of that, even though we can have around 500 to 1,000 villages with the [indiscernible] -- portfolio outstanding, can give us a very good AUM from the rural places itself. Having said that, this is a path to be worked upon. It is not as simple as putting it on the Excel sheet. You need a team, you need the processes. You need all the enablers to convert this potential into new real business. But we are very optimistic to do it, maybe a quarter here or there. In the affordable space, what has happened is that when we started affordable housing, there was a lot of problem on the supply side. Now supply has eased a lot with many of the developers moving towards affordable housing, seeing more opportunity in affordable housing as compared to the high-cost housing segment. So the demand -- the supply has improved. And secondly, the supply has improved and the demand has not picked up so much. The developers are also showing rationality in their pricing. And secondly, there has also been a tremendous attraction from the interest rate point of view. Formerly, what as a NBF -- HFC of our size would have offered at a rate of anywhere between 13% to 15%. Now it's the same loans are available between 10% to 11% even to the informal and even to the low-income group. So the combination of the demand -- the combination of the supply and all these factors, including availability of funds and the rationality in the prices should contribute to transiting this potentially into business and into the AUM we want over the next 3 to 5 years. And this is what makes us very confident on that.

Any broad numbers we would like to share or the guidance that we gave for AUM growth over long term, 20%, 25%? That includes the housing piece? Or that is in addition?

That is more on our -- when I talk about 20%, 25%, it is more on the standalone. Housing, ideally at this base should grow at 30%, 35% plus.

The next question is from the line of Srishti Dutta from SMS India Private Limited.

Sir, I am a retail investor. So as you understand that being a retail investor, my interest is more on the part of how the share value is doing. And also how your internal business is moving. So I just -- as a retail investor, ask you, as the management of the company, how do you see the growth of the company in the next 1 year?

Sarit, if you ask me, we always have a medium- to long-term view because if you have a very short-term view, you will have short-term actions. So over the years, if you see the history of March in our investor presentation we have shown, if I step in your shoes as a retail investor, what am I going to look into? That if you see the history of MAS starting from INR 2 crores asset size in 1995, it has registered a CAGR of 35% plus, be it the AUM or be it the profitability. And 25 years is a very long period to judge a company through all thick and thins. Over a year, very difficult to predict right now with the second wave, but the fundamentals of the company is to grow anywhere between 20% to 25%. Once the economy normalizes, we see no reason why we should not grow at that rate with all the enablers of a very strong capital, very strong capabilities to raise that in a very large market size in retail. As far as the prices are concerned, I have no control on that. It is only about how we perform. And we all know that investing is a business where you need to be patient. And once you are patient and the companies like us who are generating a CAGR of 20%, 25% over a time horizon, you will definitely get good returns.

The next question is from the line of Shreepal Doshi from Equirus.

I just have a few questions. Firstly, sir, if we look at the disbursement number, we've seen 25% quarter-on-quarter growth, of course within a low base. But if you look at on the loan book side, the SME book has grown by 22% sequentially. So fair to assume that most of the disbursement was towards this segment?

Yes, because it -- we saw an MSME, SME, 2-wheeler and commercial vehicle and this is are the areas where we found good opportunity in the lines of a [ midterm ] of extending credit where it is due. And because of our distribution model of working at 3,500 places, along with the businesses whom we are connected, I think there are more than 100 in numbers. So that was a good opportunity this quarter to fund to them.

And sir, anything that we have done on the ECLGS side for any of our customer segments, like across the product category that we cater to?

Yes. Yes. So far, we have disbursed INR 19 crores under ECLGS.

So for the whole year, is it? Or only for the 4Q?

For the whole year. The disbursement was started from the next -- second half only.

Right, right. Great. Okay. And sir, the next question was with respect to our -- I mean, if you look at our, say, [indiscernible] ability in the different buckets, what would be the 31 to 60 [ BPD ] for each of the segments? If you can give some color there. Like which segment will be having a higher proportion of the 31 to 60 and 60 to -- 61 to 90 and above 90 [ BPD ] sort of. So if you can just give some color on the product segment.

In that, we are seeing stress on the 2-wheeler portfolio followed by commercial vehicle and then MSME and SME in order.

So overall, it is 1.22%.

Right. Right. Yes, overall, the numbers like I have it, but I was just thinking like [indiscernible] Indicated that the highest, highest...

Also that is what I shared with you, that it is start with 2-wheeler, SRTO, MSME and SME in that order.

Okay, okay. And sir, have you know -- like why are -- because restructuring as a regulatory supportive available, so do you think we will be using that as a tool in the coming quarters? Because you have seen the second wave impacting us or at system at large, everyone, so do you think we will be using that in the coming quarters?

See, we are more than happy to use this tool for the ones who really deserve. I said in my last commentary also that restructuring will depend upon the capabilities of the borrowers to pay once it is restructured. If we think that even after restructuring, the cash flows are not sufficient to pay, then it makes no sense to restructure. So we see as the merit of each case, the cash flow, the new cash flow post this COVID and all. And when we see that in these cases deserving, then only it is restructured. Otherwise, we take it as the bucket it comes. So at the end of the day, we are not carrying any unknown stress of the portfolio in the balance sheet.

Right. Right, sir. That's a prudent call actually. Sir, one last question. I mean what will be the collection efficiency? I mean I understand given that some are at 95%. But within the segment, if you look at, I understand that you said that in 2-wheeler, the stress is high. But what would that number look like for, say, for the month of Feb, March and sort of April? [indiscernible].

When we talk about slippages high in 2-wheeler, it implies that the collection efficiency was low there. So once again, the collection efficiency challenges followed in the priority of 2-wheeler SRTO, MSME and SME.

Okay. Okay. And sir, one last question was that we reached INR 200 crores through NABARD. Is that number right? Or I've got it wrong?

Yes, INR 200 crores.

Yes, INR 200 crores.

And what was the rate of -- what rate -- where we able to rate that?

That is all in 9%, whereby the loan is for 5 years.

Okay. Long-term for 9%, okay.

Yes.

The next question is from the line of [ Rahul Maheshwari ] from AMBIT Asset Management.

First of all, sir, and hope all well at your end. Sir, I had 2 questions, sir. Going last one, the management and every company has gone through the -- have sailed through the headwinds. What are the key learnings or in terms of your underwriting or what the trade tightening which you have done? Or in terms of the employee productivity, any 3 pointers or hard practices we would be following in FY '22? It would be very helpful in terms of to know how stringent we are making the great practices also.

See, as far as the credit dictum is concerned, of extending credit where it is due, based on their liquidity, solvency, business model, past track record, are the fundamentals which are always followed during good times and during challenging times. Now have we changed -- your assessment technique is very important and that assessment techniques changing is a continuous process. Say for example, right now, the data cycle will be delayed for certain businesses or some other implications of delayed in their order book or they're not getting the liquidity sufficiently, they would like to raise from the other sources. All those counts are taken into account, and then the credit assessment is done. And with a higher cost -- with either higher haircut or with a higher conservative approach. And that is being revisited every month now. So depending upon the product, depending upon the branch, depending upon the behavior of the portfolio, and it is very dynamic in nature. In terms of employee productivity, as it was -- this was the time whereby we need to stand by them. And we have utilized this time to engage with them more closely on the future part of the company to motivate them to identify their [indiscernible] and they're working with the companies, ideology and accompanies the goals. And interacting with them and getting the feedback from them from time to time as to how we can be more relevant at the marketplace while not compromising on the asset quality has been our prime objective during this -- where we had less action on the ground.

So sir, in terms of -- as you told, it's an ongoing process, and definitely, I agree with you, sir. But in terms of -- as India's business economic activity is down. So what is the company rejection rate? If you can give in terms of rate that in quarter 4 and Jan until April, how the rejection rate has been going through? Because you have to tighten the screw when the things are not good. So that would be very helpful, sir, in terms of understanding your more tightening of the months.

The rejection rate in the last quarter can be -- would be around 40% to 45% as against our normal rejection rate of around 20% to 25%. So almost increased by 1.5 to 1.75x.

And then April and May, it has further increased, sir? Or it's at 40%, 45% revenue?

April and May, we are struggling to get the log-ins because it makes -- the majority of the area, people are not interested in taking loans. They are interested in taking remdesivir and other drugs, loans [indiscernible]. Disbursement in April and May has been hardly 20%, 25% of what we used to do. And to be honest, we are also not focused on that because the welfare of the employee starting from the welfare of the family to employee to relatives had taken the precedence over everything.

100%, sir. And sir, second last question from my side, sir. As you told that [ March ] in last 1, 1.5 years at different times of calls or different points of meeting, that [ March ] is evaluating on the co-lending or co-originating platform or having the tie-ups with the fintech. So if at all, you can give some highlight about how the proceedings are going on. What you are evaluating or want to transform yourself into? No exact details about with whom is not required, but how the transformation would be taken place, that's more important. What you're looking for?

My thought on fintech is the ones who are tech has to learn fin and ones who are only in fin have to learn tech. And that is where fintech will really work. So we are more on the fin side being the commercial lender for so many years. We are tied up with so many fintechs for origination, for co-lending. And we are working on various pilots, whereby our contribution is on credit prudence and actually credit where it is due, and their expertise comes on scale and speed. So we are very continuously engaging with all of them. And it's a work-in progress still before we can zero down on this is the number what we are going to take or this is the target what we are going to achieve. So it is not on a target basis right now. It is more on the basis of understanding each other and having a common ground, whereby we can scale up. We can be the customers delight by using technology. But at the same time, we don't end up with higher losses because at the end of the day, if you end up with higher losses and don't make money, all these things will not make sense. On these fundamentals, we have been tying up with almost all of them, depending upon the merit, depending upon the product they are into. But we are very sure that the tech part will play an important role, and we are working very actively and consciously on that.

Sir, just a follow-up on this question. If you are having a tie-up with -- if you're evaluating such kind of tie-up, so can we assume that leaving apart the 4 segments where the company is, it stand in terms of this pillar of a consumer base for lending in terms of unsecured? Or it will be related to the existing segments only?

Maybe it is limited to the existing segment, plus we'll be trying out some sort of personal loans as a pilot.

I would request [ Mr. Maheshwari ] to rejoin the queue for follow-up questions. The next question is from the line of Ankit Gupta from Bamboo Capital.

And I think it's pretty commendable to know the company has [indiscernible] during these challenging times and hope it continues next year as well. But if you can talk about the -- how I've seen the -- how has been the feedback from your microfinance customers? And for the past month or so? And how do you think that they are responding to this challenging time that we -- apart from the 1.5 months, it has been pretty challenging. And any view how their collection efficiency is picking up? And what are your expectations about this portfolio performance?

So on the feedback -- on the microfinance side till April and everything was up to normal, so to say. And from May, as I shared with you, it is not a time to take the exact feedback from them regularly. But we are saying that this time, the rural folks have also been affected. So this will definitely have the impact on the collections of the microfinance NDFs. But having said that, the ones whom we work with, we work with an arrangement, whereby they take the complete guarantee of what we've fund through them, and we work with those who have sufficient solvency and liquidity so that they can absorb that. But stepping in the shoes of MFIs, their collection efficiency, which has stabilized in the range of around between 85% to 95% for various NDFs in various sites in the various area will, again, see a drop. How much drop? Difficult to tell right now. So that sector one, once again, will have to cope up. But the positive part is that the one thing normalizes, this is the one which recruits the fastest because they are into all basic activities. The loan size is less, the installment is less. The requirement of continuous credit is there. They don't need to -- they would not like to spoil their credit history. So these are the strong enablers for those guys to recruit fast. That is what we have seen in the first wave that the collection efficiency was increasing pretty fast as compared to other sectors.

Sure. So are we currently providing support to this NBFC customers and extending credit to them? Or we are also seeing a bit more cautious in evaluating on a case-to-case basis? Or we have stopped the disbursement with them for some time and see how the overall decision plan stands out in next year?

It's not about stopping disbursement in April and May. But just to share with you, there has been hardly any demand because further disbursements are not there. And wherever there are demand, we get into it very thoroughly as to what are the opportunities for those people to create the portfolio the way we want and in the manner we want. So that has been evaluated very closely. And while evaluating this and the basis the demand, we have found hardly any opportunity during this month.

The next question is from the line of Bharat Shah from ASK Investment Managers.

Yes. I -- my apologies, but I joined the call fairly late. So in case if a question is repeated, please pardon me. My first question was on the expenses, both staff expense, anything related expenditure. So staff expense, I'm seeing is virtually at about INR 7 crores for last 4 quarters. And it was about close to INR 13 crores in the March 2020. Are we not keeping this to -- where on a long run, it can affect our operations because if the staff expenses so curtailed, will it not affect the long-term performance of our business?

No. [indiscernible] the majority of the sacrifice has been done by the management team in terms of forgoing salaries or taking a salary cut because I believe charity should begin from home. So as far as the major impact is on bad debt account, plus we have a structure of fixed plus variable. So obviously, when the business is down, the variable cost will also come down. And in the terms of fixed cost also, we are thankful to the complete team, where they have voluntarily, we have not imposed that. Until March had taken the deductions, varying from 25% to 5% to 10%, depending upon their scale. And we have just stabilized or restored that amount in March. And again, we are seeing this. And in April and May, we have stick our neck out and we are not going for any such adjustment. So this has -- it's a combination of the management team sacrificing and also the complete team at MAS responding to the call of taking the curtailment in their fixed salary and variable cost, obviously, as you know, because of the low business has reduced. But let me assure you, this is not at the cost of sacrificing any of the talent which we want. Let me tell you that in last -- not in the 1 year, in the last 3 years or maybe more than that, but it [indiscernible] within the last 3 years, we have not lost any of the senior guys who really matters.

My purpose is nearly to check that in order to improve our short-term performance, it should not happen that we take a long-term...

No, no. I absolutely understand, and I agree that -- as you know, Bharat, we never have a short-term view because we have been reporting on quarter post listing. Otherwise, we always take a longer-term view and a medium-term view for me is 10 years. So we never take a short-term view, and it was a well-informed decision taken as a team.

Sure. And I suppose, with sufficient part of their heart in agreement on that?

Yes, absolutely.

The other question was on the OpEx. There surprisingly, I am seeing a huge degree of variability, INR 10 crores in March '20 to INR 3.6 crores in the first quarter, then INR 5 crores, then INR 8 crores and now INR 13 crores. So any reason why these expenses are behaving in an unpredictable way?

So you are talking about other expenses, right?

Yes. [indiscernible] that's right. Starting from March '20, INR 10 crores, INR 3.5 crores, INR 5 crores, INR 8 crores and INR 13 crores?

In other expenses, the sheet I'm having, I'm not getting that number right now. But if I tell you the other expense portion, on a sequential basis this year includes our INR 5 crores, close to INR 4 crores of unspent CSR. Formally, the CSR was to be charged against P&L on where you spend it. So we already have projects identified on education and health. And that project takes time to absorb the money the way we want to distribute from time to time. So by the recent guidelines for this quarter, we had to account for around INR 4 crores as CSRs as other expense.

Like that has occurred in the March quarter?

Yes, that is only in one quarter. So if you say on 31/12/20, the other expense is INR 6.04 crores, whereas in 31/03/21, it is INR 11.74 crores. So you -- from INR 11.74 crores, if you deduct INR 4 crores, it will be close to INR 7 crores, INR 7.5 crores, which is under the normal business pattern.

Okay. The third aspect was on the asset quality. And I know that, in general, you have been very, very careful and very strongly focused on ensuring quality of the asset in a tight vein. But I was a bit surprised with the credit cost, which is being charged in the fourth quarter. If you see the gross NPA that has moved from INR 67 crores in the third quarter to INR 104 crores. Our net NPAs have moved up from 51% to 82%. So provision coverage more or less remain around 21%, 22%. But growth NPA has moved up, net NPAs have moved up, but the provision credit cost that we have reflected in the fourth quarter has been relatively modest at only INR 7.5 crores. So I hope to your mind, it reflects the full reality. And over that, you need to charge in account for these things taken into account.

So just to start with understanding the numbers. INR 104.30 crores out of INR 104.35 crores, there is a INR 40 crores of element, which is assigned. So we are not supposed to provide anything on that. And this INR 40 crores is because -- is a cumulative figure over all these years. Because since it is assigned, neither can I -- I know whether banks have written off or what they have done. So we keep that figure as it is for more transparency of numbers. So out of that INR 40 crores is that portion, and 64.42% is what belongs to us. And this INR 40 crores just for the sake of information is over a cumulative assignment of more than INR 10,000 crores to INR 11,000 crores over the last 7 to 8 years. So this is the first thing which I'd like to bring to your notice. And secondly, I think I discussed this with Bhavesh also, that secondly, we -- if you have noticed, we are not dipping to our COVID provision at all. It is your CapEx status for INR 56 crores, despite of the fact that we have gone through a full year of a COVID impact. And that we have used it as a management overlay. Now what happens under Ind AS, we are supposed to provide, as per the ECL, expected credit losses in the future. So basis, the ECL, this credit impairment is taken and the complete management overlay, had I -- it was on me or it was on the management to deepen into the COVID provisioning because the portfolios we have far more in a better way than what we have projected while creating the management overlay. So we use that management overlay and kept it as it is, and the ECL was used to arrive at the credit impact.

Sure. No, no, I fully appreciate. I know the conservative standards with which MAS operates. I just wanted to be sure that -- so essentially, what we are seeing is that whatever credit costs you could see and you believe is likely to be there, is taking care of into the books. And you are sitting on a healthy additional kind of a buffer of almost INR 60 crores for any potential contingent.

Exactly. Exactly, right. Right.

One last question from this side. Just I've asked you before also. And last year has been a very, very unusual and difficult period. Just when we thought that probably we are going to see this back of this monster, once again, it has created uncertainty. But is it likely or has it happened that we have become a bit more defensive than we should be? While clearly prudence, MAS [indiscernible] represented do desire an inspiration for superior growth. At the same time, very careful assessment and tight credit quality, which is the way lending business has to be. But I'm saying, are we a little bit too conservating and shrinking within our sales? Or it is just that whatever has happened and is happening? And in your opinion, the way we are playing it a bit more conservatively is actually the best way to do.

So -- we have [indiscernible]. We have kept it very simple over all these years [indiscernible] better quality, profitability and the growth. And with the market and the strong enablers what we have, we strongly believe that we have all potentiality under normal circumstances to grow between 20% to 25%. If I just give an example, in Q3, we have disbursed INR 100 crores, INR 1,000 crores. But Q4 was normal, we could disburse INR 1,300 crores. Q3 was INR 5,020 crores in AUM, and in Q3, it is INR 5,300 crores. So indicative of the fact that whenever we get opportunities, we are keen to grow because as an organization, which is not keen to grow practically, it will be difficult for them to survive. But it is -- but as a practitioner, I think that there's nothing wrong to be over-defensive for a particular quarter or 2 because unless you get ahead the complete things as to how the things are spinning out and just going for a higher growth can be counterproductive at times. But having said that, we are inclined for a quality growth. We have demonstrated that whenever we get an opportunity, we will do it. We are very confident a year, a quarter here or there or 6 months here or there. MAS will double its AUM every 3 to 4 years. If you see -- when we went to IPO, we are close to around INR 3,000 crores, INR 3,500 crores. I think the liberty to call this INR 5,600 crores to INR 6,000 crores. So in the most difficult of the 3 years, we have grown from INR 3,500 crores to INR 6,000 crores. So given an opportunity, we are keen to grow, we will grow. It is just a matter of prudence at the right time. So what you call [ inconvenient ] timing. Timing is very important.

Sure. No, I respect that, Kamlesh. Your judgment on that, obviously, is the most important one, when to be defensive and when to be on different foot. So I respect that.

The next question is from the line of Sagar Jethwani from Philip Capital.

Sir, how many branches do we plan to add this year and next year? And maybe if you can segregate it state wise? And what will be the OpEx related to that?

So currently with 100 branches, if things are okay, even for the remaining 3 quarters, we would like to take it to anywhere between 150 to 175 branches. Because we would like to penetrate deep now with sufficient experience in Maharashtra, Madhya Pradesh and Rajastan, the way we have expanded ourselves in Gujarat. And OpEx will be based not only on the branch operation. Let me tell you that for a finance company, the branch opening does not enter much of the OpEx. It is a product line which enters OpEx that if you are in the smaller ticket size, OpEx will be higher. If you are into a larger ticket size, OpEx will be higher. So depending upon the products that we have at various branches, the OpEx will be accordingly aligned to. So difficult to give a complete number, but depending upon the branch, depending upon the product they develop, that will be the result at OpEx.

Okay. And sir, what is your emergency credit book stands at currently? And what is the yield on that?

Which book?

ECLG.

ECLG. Just INR 19 crores, INR 19 crores.

Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to Mr. Kamlesh Gandhi, Chairman and Managing Director, for closing comments.

So thank you, everybody. And I wish all of you a very good health. Please take care of yourself, your family, your colleagues, and please stay safe. And we, at MAS, will do the same. And let me assure you that we'll endeavor to accomplish and to work and to work very hard on our mission of excellence to our endeavors. Thank you for your support all the way, and wish you all the best. Thank you.

Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.